Former Chief Administrative Officer for City of Bell Sentenced to Federal Prison for Cheating IRS to Avoid Taxes on Corrupt Activities
|U.S. Attorney’s Office April 14, 2014|
LOS ANGELES—Robert A. Rizzo, the former top administrator in the city of Bell who has admitted his role in a widespread municipal corruption scandal, was sentenced today to 33 months in federal prison in a tax fraud scheme designed to hide part of the massive income he was bilking from the small Los Angeles County city.
Rizzo was sentenced today by United States District Judge George H. King, who said Rizzo’s activities demonstrated “greed in cheating the taxpayers of the United States after cheating the citizens of Bell.” In issuing the 33-month prison term, Judge King ordered that it run consecutive to a prison term Rizzo is expected to receive Wednesday when he is sentenced in Los Angeles Superior Court in his corruption case.
Rizzo, 60, of Torrance, pleaded guilty in January to federal charges—conspiracy and filing a false federal income tax return with the Internal Revenue Service—in a scheme that resulted in hundreds of thousands of dollars in unpaid federal income tax. At today’s sentencing hearing, Judge King ordered Rizzo to pay $255,984 in restitution, a figure that equals the amount of unpaid taxes directly attributable to the defendant.
In his plea agreement, Rizzo admitted that he created a corporation to fraudulently claim losses on his income tax return, which served to illegally reduce his tax liability on the significant income he was receiving from the city of Bell. Rizzo also admitted claiming personal expenses as business deductions.
Rizzo’s “conduct can only be described as corrupt,” prosecutors wrote in a sentencing memo filed with the court. Not only did Rizzo fleece the city of Bell and its residents, he also bilked the Internal Revenue Service “in an extraordinary display of greed.”
According to court documents, Rizzo, sometime in 2002, created an S Corporation that he called R.A. Rizzo Incorporated (RARI). Rizzo was assisted in the scheme by co-conspirators that included his tax preparer, Robert J. Melcher, who has pleaded guilty to aiding and abetting the filing of a false tax return.
Rizzo used RARI to claim bogus losses in relation to a purported rental property in Auburn, Washington. RARI’s corporate tax return fraudulently deducted more than $571,530 in losses for the years 2006 through 2009.
Rizzo also admitted in his plea agreement that he used a RARI account to pay for more than $80,000 in personal expenses in 2009 and $120,000 in construction work on his residence in Huntington Beach in 2010. RARI’s tax returns falsely claimed that these expenses were related to rental property.
Rizzo “abused his position to fleece the city of Bell of hundreds of thousands of dollars that he paid to himself in excessive salary—monies that could have been spent for the benefit of the people he served,” according to the government’s sentencing memorandum. “But not satisfied with betraying the trust place in him by the city and its residents, in an extraordinary display of greed, [Rizzo] also found it necessary to cheat the IRS.”
Melcher, who as a result of his guilty plea faces a sentence of up to three years in prison, is scheduled to be sentenced on May 12 by Judge King.
The cases against Rizzo and Melcher are part of an ongoing investigation being conducted by special agents with IRS-Criminal Investigation and the Federal Bureau of Investigation.